World's second-biggest exporter of thermal coal braces for floods

Five years ago floods linked to a La Nina weather pattern nearly brought Australia's coal industry to a standstill. With another of the sea-cooling events now forming and the risk of heavy rains returning, mining companies say they are ready.Reuters | May 02, 2016, 06:44 IST

SYDNEY: Five years ago floods linked to a La Nina weather pattern nearly brought Australia's coal industry to a standstill. With another of the sea-cooling events now forming and the risk of heavy rains returning, mining companies say they are ready.

They have bought pumps, fortified levees and brushed up on procedures to deal with the deluge of water that a La Nina can bring, the companies say.

The stakes could be high. Over several months in late 2010 and early 2011, during the last La Nina event, around 85 percent of Australia's coal mines across a region bigger than Texas either had to restrict output or close as record rains fell.

Australia is the world's biggest exporter of metallurgical coal and second-biggest exporter of thermal coal.

While coal prices briefly raced to near peak levels as buyers vied for cargoes, clean-up bills far outweighed the short-lived financial gains. That could prove even more disastrous than in 2011, with MineLife Services in Sydney saying coal prices have now retreated to the point where at least a third of the industry is operating at a loss.

Idemitsu Australia Resources began expanding flood levees as early as 2008 after flooding in one of its mines.

"We learned a lot of lessons ... which have gone into improving our procedures and planning to protect operations and maintain a safe working environment," said Idemitsu Australia's chief operating officer Steve Kovac.

And most mining companies should now be better prepared, said Andrew Musgrave, group manager of sales for Dowdens Pumping & Water Treatment, which helps companies mitigate flood risk.

"There is an excess of de-watering equipment on all sites at the moment," Musgrave said.

Cooling La Nina weather patterns have followed 11 of the last 15 El Nino warming patterns, records show. Australia is just now emerging from an El Nino - which can cause drought in Australia - to the much wetter La Nina.

Australia's weather bureau warned this week a threshold for a new La Nina will likely be breached by September.

A replay of 2011 - one of the worst years for floods on record - is not guaranteed, but ominous similarities are emerging, said Andrew Watkins, the bureau's head of climate prediction services.

"Like the last time, we are seeing a rapid cooling off in the Pacific Ocean, a strong signal La Nina's on the way," Watkins said.

Rail transport company Aurizon, which expects to haul more than 200 million tonnes of coal this year, said it is ready to respond to flood conditions at its Central Queensland Coal Network that connects many of the country's collieries.

"Significant infrastructure work has been undertaken since 2011," an Aurizon spokesman said, and contingency plans have been put in place with mines and ports.

For its part, mining and commodity trading giant Glencore said it was prepared to divert water from its mines to safe storage sites if required.

"This limits the risk of uncontrolled discharge," a spokesman said.

Since the last La Nina, when thermal prices climbed to near $150 a tonne and metallurgical coal to $330, prices have retreated to around $50 and $90, respectively.

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